Exhibit 99.1
Hercules Technology Growth Capital Announces Record Second Quarter
2007 Financial Results And Declared $0.30 Dividend
Record commitments of $143.9 million; Record fundings of $100.4 million
Net investment income before taxes increases 193% to $0.29 per share
PALO ALTO, Calif.--(BUSINESS WIRE)--Aug. 2, 2007--Hercules
Technology Growth Capital, Inc. (NASDAQ: HTGC), a leading specialty
finance company providing growth capital in the form of venture debt
and equity to venture capital and private equity-backed technology and
life science companies at all stages of development, today announced
its financial results for the second quarter ended June 30, 2007.
Second Quarter 2007 Highlights:
-- Total debt and equity commitments reached $143.9 million in
the quarter, comprised of $143.1 million in debt commitments
and $750,000 of equity commitments. This represents a 253%
increase over total commitments of $40.8 million in Q2 2006.
-- Total debt and equity funding in the quarter totaled $100.4
million. Debt funded in the quarter totaled $99.4 million and
equity funding totaled $1.0 million. This is a 205% increase
over the $32.9 million funded in Q2 2006.
-- Hercules had warrant positions in 70 portfolio companies at
the end of the second quarter of 2007, as compared to warrants
in 41 companies at the end of the second quarter of 2006.
-- Total investment income increased to $13.3 million, a 96%
increase over second quarter 2006 investment income of $6.8
million.
-- Net investment income before taxes during the quarter grew by
193% to $7.2 million, compared to $2.5 million in the second
quarter of 2006. Net investment income per share was $0.29 for
the second quarter of 2007 compared to $0.19 per share in the
second quarter of 2006.
-- Net income more than doubled to $8.3 million or $0.33 per
share on 25.2 million basic shares outstanding versus $3.4
million or $0.26 per share on 12.9 million basic shares
outstanding for the second quarter of 2006.
-- Net taxable income, excluding long-term capital gains, was
approximately $7.4 million or $0.30 per share as compared to
$4.2 million or $0.33 per share on in the second quarter of
2006.
-- Declared eighth dividend since inception of $0.30, payable on
September 17, 2007 to shareholders of record as of August 16,
2007.
-- Total investment portfolio at fair value increased to $416.7
million from $193.6 million in the second quarter of 2006, an
increase of 115%.
"This was a quarter of significant achievements for us. We not
only achieved record commitments, funding and earnings, but we also
greatly expanded our capital base to support continued investment
momentum in promising life sciences and technology companies," said
Manuel Henriquez, CEO of Hercules Technology. "In early May, we
increased our borrowing capacity by $100 million with the addition of
Deutsche Bank to our credit facility. During the quarter, we borrowed
$12 million of leverage previously approved under the SBA program and
recently received approval to draw on the full availability of $127
million, subject to certain regulatory limitations. In June, we
successfully raised $124.2 million of gross proceeds by issuing 9.2
million shares in our fourth secondary offering. Proceeds from this
equity raise combined with our increased borrowing capacity positions
us for future growth by enabling us to fund new and existing venture
capital and private equity backed companies for the next 4-5
quarters."
"We continue to expect to see 10 to 12 liquidity events for the
year. During the first six months of 2007 we have had two portfolio
companies acquired, one completed its IPO, two portfolio companies
filed registration statements for their IPO's of which one was
subsequently withdrawn, and three other portfolio companies are in
various stages of M&A discussions."
"We believe the current venture capital environment remains
healthy, and the IPO market for growth stocks such as technology and
life science companies seems to be very encouraging. According to the
National Venture Capital Association, during the second quarter, there
were 26 IPO's raising approximately $4.3 billion, more than twice the
figure from the same period last year. Of these, 13 were in the
technology sector, while 11 were in life sciences, one of which was a
Hercules portfolio company."
"The robust venture capital environment is contributing to the
growth of our warrant portfolio - both in number of warrants held and
the fair value of those warrants, which now stands at $14.7 million.
We believe these developments support our confidence in the potential
upside in our warrant portfolio," concluded Henriquez.
Second Quarter Review and Operating Results
During the quarter, Hercules entered into agreements to provide
debt financing of approximately $143.1 million and funded a total of
approximately $99.4 million in debt investments. The weighted average
fundings during the second quarter were approximately $49.8 million.
The difference between the total fundings and the weighted average
fundings reflects the timing of fundings occurring later in the
quarter.
In addition, Hercules committed to invest $750,000 in equity to
one portfolio company and funded a total of $1.0 million in two
portfolio companies during the quarter.
Proceeds from principal repayments were approximately $30.1
million, comprised of amortization of principal of approximately $16.7
million, early repayments of approximately $8.0 million from three
portfolio companies, and pay downs of $5.4 million on two portfolio
companies in workouts.
David Lund, CFO of Hercules Technology said, "Our increased credit
facility and our recent equity issuance were key milestones this
quarter. These important events give us greater ability to increase
and diversify our portfolio investments, and create additional
opportunities to build our warrant portfolio to support future
returns. Our credit quality remains strong as evidenced by a 2.16
rating which was consistent with the prior quarter."
Investment Portfolio
The fair value of Hercules' investment portfolio at quarter-end
was approximately $416.7 million as compared to $193.6 million at the
end of the second quarter of 2006.
Of the $416.7 million, the fair value of the equity portfolio was
$11.8 million invested in 17 portfolio companies, compared to a fair
value of approximately $5.5 million invested in nine portfolio
companies at the end of the second quarter of 2006. Warrants have been
received in connection with the Company's debt investments in each
portfolio company. The Company currently holds warrants in 70
portfolio companies, with a fair value of approximately $14.7 million
included in the investment portfolio of $416.7 million. The fair value
of the warrant portfolio has increased by 116% as compared to $6.8
million at June 30, 2006. These warrant holdings would allow Hercules
to invest approximately $41.5 million if such warrants are exercised.
Since inception, Hercules has net realized gains of $3.7 million on
warrant and equity positions.
As of June 30, 2007, Hercules' unfunded debt commitments were
approximately $111.1 million to 31 portfolio companies. Since these
commitments may expire without being drawn upon, the total commitment
does not necessarily represent future cash requirements. In addition,
the Company executed non-binding term sheets with six prospective
portfolio companies, representing approximately $47.9 million. These
proposed investments are subject to completion of the Company's due
diligence and final approval process, as well as the negotiation of
definitive documentation with the prospective portfolio companies. Not
all non-binding term sheets are expected to close and do not
necessarily represent future cash requirements.
The overall weighted average yield to maturity on the Company's
loan portfolio was approximately 12.75% as of June 30, 2007. Yields to
maturity are computed using interest rates at inception of the loan,
and include amortization of loan facility fees, commitment fees and
market premiums or discounts over the expected life of the debt
investments, weighted by their respective costs when averaged and are
based on the assumption that all contractual loan commitments have
been fully funded and held to maturity.
Income Statement
Continued growth of Hercules' debt investments contributed to a
96% increase in total investment income to $13.3 million during the
second quarter of 2007 as compared to $6.8 million in the second
quarter of 2006. Fee income included approximately $782,000 of fees
and acceleration of deferred income related to early repayments.
Interest expense and loan fees driven by borrowing activities were
approximately $2.0 million during the second quarter, an increase of
approximately 22.4% versus $1.6 million in the same quarter of the
previous year. The increase was attributed to a higher average debt
balance of $108 million in the second quarter of 2007 as compared to
$76 million for the comparable period in 2006.
Total operating expenses, excluding interest expense and loan
fees, for the second quarter of 2007 were $4.0 million, which is an
increase of $1.3 million, compared to $2.7 million for the second
quarter of 2006. The increase as compared to the quarter ended June
30, 2006 was primarily attributable to higher compensation expense
related to an increase in new employees, higher facility expenses from
expanded operations, and workout expenses related to loans in two
portfolio companies.
Net investment income before provision for income taxes for the
second quarter of 2007 was $7.2 million, which represents an increase
of 193%, compared to approximately $2.5 million for the second quarter
of 2006. Net investment income before income taxes was $2.0 million,
or 38.6% higher than the first quarter of 2007. Net investment income
before provision for income taxes on a basic per share basis during
the current quarter was $0.29 per share, based upon 25.2 million basic
shares outstanding, compared to $0.19 per share in the comparable
quarter of 2006 on 12.9 million basic shares outstanding.
Net realized loss of approximately $336,000 in the second quarter
of 2007 was attributed to the realized loss in warrants in two
portfolio companies, one of which was sold and the other liquidated
during the quarter.
Hercules recognized a net increase in unrealized appreciation on
investments of approximately $1.4 million during the second quarter of
2007. The net increase in unrealized appreciation was primarily
attributed to increased valuations in our warrant and equity
investments in both our public and private portfolio companies.
Dividends
The Company distributed a dividend of $0.30 per share to its
shareholders during the quarter. This distribution was the seventh
consecutive quarterly dividend paid and brings total distributions to
$1.825 per share since its public offering in June 2005.
The Board of Directors declared a second quarter dividend of $0.30
per share. The dividend will be payable on September 17, 2007 to
shareholders of record as of August 16, 2007. The ex-dividend date is
August 13, 2007. This was the Company's eighth consecutive dividend
declaration since its initial public offering, and will bring the
total cumulative dividend declared to date to $2.125 per share.
For the quarter ended June 30, 2007, the Company declared a
distribution of $0.30 per share. The determination of the tax
attributes of the Company's distributions is made annually as of the
end of the Company's fiscal year based upon its taxable income for the
full year and distributions paid for the full year; therefore, a
determination made on a quarterly basis may not be representative of
the actual tax attributes of its distributions for a full year. If the
Company determined the tax attributes of its distributions
year-to-date as of June 30, 2007, 93.6% would be from ordinary income
and 6.4% would be a return of capital for stockholders; however, there
can be no certainty to shareholders that this determination is
representative of what the tax attributes of its 2007 distributions to
shareholders will actually be. For the fiscal year ended December 31,
2006, a portion of the distributions to the Company's shareholders was
deemed a return of capital.
Our short-term goal is to pay dividends completely out of
earnings, a key milestone for the Company.
Liquidity and Capital Resources
At June 30, 2007, net assets were approximately $390.0 million,
with a net asset value per share of $12.05, which represents an
increase of $236.7 million or $0.81 per share, compared to the second
quarter of 2006.
The Company ended the second quarter with $7.5 million in cash and
cash equivalents.
"With the addition of Deutsche bank to our credit facility with
Citibank we successfully increased the borrowing capacity to $250.0
million through the term of the loan, May 1, 2008. Borrowings under
the facility are based on Libor plus 120 basis points. The addition of
a great partner such as Deutsche Bank to the credit facility enhances
our ability to continue to invest for the benefit of our
shareholders," stated CFO Lund.
Hercules credit facility combined with the $127 million available
under the SBA program allows it access to $377 million in capital. At
June 30, 2007, approximately $22 million was outstanding under the
credit facility and $12.0 million was outstanding under the SBA
debentures leaving approximately $343 available to borrow, subject to
certain credit and regulatory limitations.
Based on Hercules' current stockholders' equity and its SEC
exemptive relief for borrowings available under the SBA debenture
commitments, the Company has the potential to leverage its balance
sheet in excess of $500 million. This assumes Hercules determines to
expand its existing credit facilities.
Portfolio Asset Quality and Diversification
As of June 30, 2007, grading of the debt portfolio at value,
excluding warrants and equity investments, was as follows:
Grade 1 Approximately $21.2 million or 5.4% of the total portfolio
Grade 2 Approximately $296.0 million or 75.9% of the total portfolio
Grade 3 Approximately $63.2 million or 16.2% of the total portfolio
Grade 4 Approximately $9.7 million or 2.5% of the total portfolio
Grade 5 Approximately $0.0 million or 0.0% of the total portfolio
At June 30, 2007, the weighted average loan grade of the portfolio
was 2.16 on a scale of 1 to 5, with 1 being the highest quality,
compared with 2.16 as of March 31, 2007. Hercules' policy is to adjust
the grading on its portfolio companies as they require additional
equity capital.
Hercules' portfolio as of June 30, 2007 was comprised of
investments in the following industries:
-- 21.3% in communications and networking companies
-- 21.2% in drug discovery companies
-- 9.4% in software companies
-- 8.9% in specialty pharmaceutical companies
-- 7.1% in electronics and computer hardware companies
-- 5.4% in semiconductor companies
-- 4.7% in consumer and business product companies
-- 4.1% in information services companies
-- 4.0% in therapeutic companies
-- 3.4% in drug delivery companies
-- 2.8% in Internet companies
-- 2.0% in energy companies
-- 1.9% in advanced specialty materials & chemicals companies
-- 1.5% in biotechnology tools companies
-- 1.2% in media/content/info companies
-- 1.1% in diagnostic companies
Other Significant Events
In June 2007, Hercules completed a public offering of 9.2 million
shares, in which the Company raised gross proceeds of $124.2 million.
The proceeds were used to reduce borrowings under our credit
facilities, invest in debt and equity securities and other general
corporate purposes.
On June 5, 2007, we announced an alliance with Market Bridges Ltd.
to bring venture lending opportunities to emerging Israeli and
Israeli-related companies in the technology and life sciences sectors.
Market Bridges is a financial services and business-development firm
that bridges emerging Israeli growth companies and international
capital and markets.
On July 31, 2007, we received notification from the SBA that our
request to increase our leverage by $77 million was approved. This
increase allows us to borrow up to the full amount of $127 million
currently available under the SBA program, subject to certain
regulatory limitations and that additional credit is available to the
Company.
Conference Call
Hercules has scheduled its 2007 second quarter financial results
conference call for August 2, 2007 at 2:00 p.m. PDT (5:00 p.m. EDT).
To listen to the call, please dial (800) 591-6942 or (617) 614-4909
and enter the passcode Hercules (43728537) approximately 10 minutes
prior to the start of the call. A taped replay will be made available
approximately two hours after the conclusion of the call and will
remain available for one week. To access the replay, please dial (888)
286-8010 or (617) 801-6888 and enter passcode 59076988.
The Hercules financial results conference call will be available
via a live webcast on the investor relations section of the Hercules
website at http://www.HTGC.com. Access the website 15 minutes prior to
the start of the call to download and install any necessary audio
software. An archived webcast replay will be available on the website
for 12 months.
About Hercules Technology Growth Capital, Inc.:
Founded in December 2003, Hercules Technology Growth Capital, Inc.
is a NASDAQ traded specialty finance company providing debt and equity
growth capital to technology and life science companies at all stages
of development. The Company primarily finances privately held
companies backed by leading venture capital and private equity firms
and also may finance certain publicly-traded companies. Hercules'
strategy is to evaluate and invest in a broad range of ventures active
in technology and life science industries and to offer a full suite of
growth capital products up and down the capital structure to
prospective clients ranging from early-stage growth to expansion stage
companies. The Company's investments are originated through its
principal office located in Silicon Valley, as well as additional
offices in the Boston, Boulder, Costa Mesa and Chicago areas.
Providing capital to publicly-traded or privately-held companies
backed by leading venture capital and private equity firms involves a
high degree of credit risk and may result in potential losses of
capital.
For more information, please visit www.HTGC.com. Companies
interested in learning more about financing opportunities should
contact info@HTGC.com, or call 650.289.3060.
Forward-Looking Statements:
The statements contained in this release that are not purely
historical are forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to
uncertainties and other factors that could cause actual results to
differ materially from those expressed in the forward-looking
statements including, without limitation, the risks, uncertainties and
other factors we identify from time to time in our filings with the
Securities and Exchange Commission. Although we believe that the
assumptions on which these forward-looking statements are reasonable,
any of those assumptions could prove to be inaccurate and, as a
result, the forward-looking statements based on those assumptions also
could be incorrect. You should not place undue reliance on these
forward-looking statements. The forward-looking statements contained
in this release are made as of the date hereof, and Hercules assumes
no obligation to update the forward-looking statements for subsequent
events.
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
June 30,
2007 December 31,
(unaudited) 2006
------------- -------------
Assets
Investments, at value (cost of
$411,011,161 and $279,946,465,
respectively) $416,705,087 $283,233,751
Deferred loan origination revenue (4,939,369) (3,450,971)
Cash and cash equivalents 7,465,828 16,404,214
Interest receivable 4,934,961 2,906,831
Other assets 3,570,301 2,048,384
------------- -------------
Total assets 427,736,808 301,142,209
Liabilities
Accounts payable 535,247 540,376
Accrued liabilities 3,477,486 4,189,011
Short-term loans payable 21,700,000 41,000,000
Long-term loans payable 12,000,000 -
------------- -------------
Total liabilities 37,712,733 45,729,387
------------- -------------
Net assets $390,024,075 $255,412,822
============= =============
Net assets consist of:
Par value $32,371 $21,927
Capital in excess of par value 391,061,289 257,234,729
Unrealized appreciation on investments 5,042,341 2,860,654
Accumulated realized gains (losses) on
investments (2,017,940) (1,972,014)
Distributions in excess of investment
income (4,093,986) (2,732,474)
------------- -------------
Total net assets $390,024,075 $255,412,822
============= =============
Shares of common stock outstanding ($0.001
par value, 60,000,000 authorized) 32,371,376 21,927,034
============= =============
Net asset value per share $12.05 $11.65
============= =============
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended June Six Months Ended June 30,
30,
------------------------ -------------------------
2007 2006 2007 2006
------------ ----------- ------------ ------------
Investment income:
Interest $11,791,547 $6,175,831 $20,827,536 $11,810,370
Fees 1,483,213 612,080 2,126,171 1,464,674
------------ ----------- ------------ ------------
Total investment
income 13,274,760 6,787,911 22,953,707 13,275,044
Operating expenses:
Interest 1,763,285 1,357,893 2,449,250 3,034,875
Loan fees 250,313 286,688 516,420 537,481
Compensation and
benefits 2,014,763 1,127,238 3,954,324 2,332,320
General and
administrative 1,713,931 1,418,584 3,022,167 2,603,977
Stock-based
compensation 292,705 130,000 546,455 253,000
------------ ---------- ------------ ------------
Total operating
expenses 6,034,997 4,320,403 10,488,616 8,761,653
Net investment
income before
provision for
income taxes and
investment gains
and losses 7,239,763 2,467,508 12,465,091 4,513,391
Provision for
income taxes - (771,823) - 988,177
------------ ----------- ------------ ------------
Net investment
income 7,239,763 3,239,331 12,465,091 3,525,214
Net realized gain
(loss) on
investments (335,629) 1,599,422 (45,926) (140,949)
Net increase in
unrealized
appreciation on
investments 1,365,634 (1,472,381) 2,181,687 2,487,100
------------ ----------- ------------ ------------
Net realized and
unrealized gain 1,030,005 127,041 2,135,761 2,346,151
------------ ----------- ------------ ------------
Net increase in net
assets resulting
from operations $8,269,768 $3,366,372 $14,600,852 $5,871,365
============ =========== ============ ============
Net investment
income before
provision for
income taxes and
investment gains
and losses per
common share:
Basic $0.29 $0.19 $0.52 $0.40
============ =========== ============ ============
Diluted $0.29 $0.19 $0.51 $0.39
============ =========== ============ ============
Change in net
assets per common
share:
Basic $0.33 $0.26 $0.61 $0.52
============ =========== ============ ============
Diluted $0.33 $0.26 $0.60 $0.51
============ =========== ============ ============
Weighted average
shares outstanding
Basic 25,190,000 12,859,474 24,037,000 11,394,175
============ =========== ============ ============
Diluted 25,401,000 12,944,601 24,248,000 11,479,302
============ =========== ============ ============
CONTACT: Hercules Technology Growth Capital, Inc.
Sally Borg, 650-289-3066
sborg@htgc.com
or
Main, 650-289-3060
info@htgc.com